More than a million can lose jobs as COVID 19 ravages the economy – experts
ECONOMYNEXT – More than a million Sri Lankans are likely to become unemployed or underemployed as the COVID 19 crisis ravages the economy and this could lead to a national security issue experts and officials say.
Urban daily-wage earners are the most vulnerable in this situation, as well as many employed in the informal sectors throughout the country, economists say.
With many sectors of the economy either shut down or working part of the time employee incomes across the board have fallen and put them in dire straits.
Former UNP Member of Parliament Dr Harsha de Silva says if remedial action is not taken by government to help the majority of these workers, matters could get serious.
“It could even become as serious as a national security problem” he warned in an interview with EconomyNext.
Mobs roaming the streets unlikely
Other experts are less pessimistic.
Dr. Muttukrishna Sarvananda of the Point Pedro Institute of Development feels that the situation is unlikely to get out of hand if the government opens up the economy as planned next week.
The spectre of hungry mobs roaming the streets looting and pillaging is unlikely to happen, Sarvananda told EconomyNext.
“Our society is reasonably well-educated and disciplined not to do that,” he opined.
In a press release issued Wednesday the Presidential Secretariat said that the aim of the government is to ensure that no loss of jobs takes place.
It said that President Gotabaya Rajapaksa had held a meeting with senior officials to find a remedy to this situation.
De Silva, a US-trained Economist and a former Chief Economist at the DFCC Bank does not want to put a number to the people who would fall through the cracks and become seriously affected.
However, the last available statistics from 2016 show that the daily wage earners number around 1.7 million people and de Silva places them in the most vulnerable group.
The next most vulnerable group of people are the self-employed, ranging from three-wheeler drivers to various handymen such as electricians and plumbers.
They number around 2.6 million and if they are unable to get to work, or ply their trades they too will be vulnerable.
Government to ease restrictions to prevent loss of livelihoods
Considering these numbers, military sources told EconomyNext that the estimate that the Intelligence Agencies are working with is that if the economy does not get working soon as many as two million people will lose livelihoods, or not be earning enough for their daily needs.
“The government is aware of these issues and that is why they will ease the restrictions soon,” these sources said.
As de Silva points out many Sri Lankan lower-income families had been struggling to put food on the table and care for their children and the COVID 19 situation “has exacerbated the situation.”
He says their fixed expenditures would stay the same but there is a limit to the spending cuts that even the better-paid workers can endure.
“These people are not those who are going out drinking in fancy places or buying luxury goods. But they are people who are managing with what they earn but maybe paying a mortgage or some other loan,” he says.
The government would have to come up with a scheme to have these payments deferred, he said.
He said when it comes to the lowest ten per cent of the families the government needs to give direct support to ensure their well-being.
“The self-employed could be financed by commercial loans. The government has to ensure the best solution is found,” he said.
Sri Lanka lacks a safety net
In the wealthier countries of the world where there are unemployment insurance and social security payments this situation has arisen but has not impacted the individuals as much.
“But in our country, we have no such thing,” de Silva points out.
Therein lies the danger of a situation where there may be unrest.
Public Servants are the least vulnerable as they will be paid their salaries whatever the economic situation as the government machinery has to work.
De Silva also points out that the private sector needs to be protected and nurtured through the crisis as it is crucial for the growth and sustainability of the economy.
“The private sector should not be denigrated and neglected in this crisis,” he told EconomyNext.
He said he was offended when the Secretary to the President P B Jayasundera called the private sector “regressive.”
Economist Sarvananda agrees. He said that any relief packages offered to the private sector by the government must keep the employees in mind, he told EconomyNext.
“There has to be some relief offered, for instance, to the apparel sector as it is vital to our economy, and that should not go only to the companies, but the government must ensure that the employees get income support,” he said.
The Presidential Task Force also discussed the issue and it was agreed that the Apparel Industry be helped to adjust to new market conditions.
De Silva unhappy that government moving away from free market
De Silva also expressed disappointment that the government appears to be moving away from the free-market economy that has been developing in this country for many years.
According to yesterday’s Presidential Secretariat statement, President Rajapaksa had recalled the recent requests by Sri Lankan students studying in other countries to return home.
In a meeting with high officials, the President had remarked that it was an indication of the large number of students going overseas to pursue higher education.
This has caused an immense outflow of foreign exchange income, Rajapaksa had said.
President Rajapaksa said that measures should be taken to expand investment opportunities in the field of tertiary education in the country so that outgoing foreign exchange could be saved while providing educational facilities to foreign students, in Sri Lanka.
A large amount of money is being spent to import medicines annually, he had noted. Most of these medicines can be manufactured locally. The Task Force was requested to prepare the necessary background to develop pharmaceutical production in the country.
The production of vegetable and other seeds required by farmers domestically was also discussed.
This upsets economist-politician de Silva. “It appears we are moving back to the 1960s and 1970s, this is very unfortunate,” he said. (Colombo May 7, 2020)